In the normal course of business, the Company is subject to proceedings, lawsuits, claims and other matters, including those that relate
to the environment, health and safety, employee benefits, export compliance, intellectual property, tax matters, and other regulatory compliance and general matters, including those described below.

The Company is subject to governmental investigations and requests for information from time to time. As previously reported prior to the Separation, the United States
Department of Justice is conducting an investigation regarding the propriety of the Companys arrangements or understandings with others in connection with certain federal contracts and the adequacy of certain disclosures related to such
contracts. The investigation arises in connection with civil litigation in federal district court filed under the qui tam provisions of the civil False Claims Act against a number of information technology companies, including the Company. The
complaints against the Company remain under seal. The Company is conducting its own internal investigation focusing on the propriety of certain transactions under federal programs under which Teradata was a contractor. During 2008 the Company shared
evidence with the Justice Department of questionable conduct that the Company uncovered and intends to continue to cooperate with the Justice Department in its investigation.

A separate portion of the governments investigation relates to the adequacy of pricing disclosures made to the
government in connection with negotiation of NCRs General Services Administration Federal Supply Schedule as it relates to Teradata, prior to the Companys Separation from NCR, and to whether certain subsequent price reductions were
properly passed on to the government. Both NCR and the Company are participating in this aspect of the investigation, with respect to certain products and services of each, and each will assume financial responsibility for its own exposures, if any,
without indemnification from the other. At this time, the Company is unable to determine the extent of its liability with respect to this aspect of the investigation.

The Company has an accrual of approximately $2 million related to the current best estimate of potential liability relating to these matters. The Company believes the amounts provided in its financial statements are
adequate in light of the probable and estimable liabilities. However, because such matters are subject to many uncertainties, the outcomes are not predictable and there can be no assurances that the actual amounts required to satisfy alleged
liabilities from the matter described above and other matters, and to comply with applicable laws and regulations, will not exceed the amounts reflected in the Companys financial statements or will not have a material adverse effect on its
results of operations, financial condition or cash flows. Any costs that may be incurred in excess of those amounts provided as of March 31, 2009, cannot currently be reasonably determined at this time.

Guarantees and Product Warranties. Guarantees associated with the Companys business activities are reviewed for appropriateness and impact to the
Companys financial statements. Periodically, the Companys customers enter into various leasing arrangements coordinated with a leasing company. In some instances, the Company guarantees the leasing company a minimum value at the end of
the lease term on the leased equipment. As of March 31, 2009, the maximum future payment obligation of this guaranteed value and the associated liability balance was $4 million.

The Company provides its customers a standard manufacturers warranty and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to
warranty claims are based upon historical factors such as labor rates, average repair time, travel time, number of service calls and cost of replacement parts. For each consummated sale, the Company recognizes the total customer revenue and records
the associated warranty liability using pre-established warranty percentages for that product class.

The following table identifies the activity relating
to the warranty reserve for the three months ended March 31:

In millions

2009

2008

Warranty reserve liability

Beginning balance at January 1

$

6

$

6

Provisions for warranties issued

2

3

Settlements (in cash or in kind)

(3

)

(4

)

Balance at March 31

$

5

$

5

The Company also offers extended and/or enhanced coverage to its customers in the form of maintenance contracts.
The Company accounts for these contracts by deferring the related maintenance revenue over the extended and/or enhanced coverage period. Amounts associated with these maintenance contracts are not included in the table above.

In addition, the Company provides its customers with certain indemnification rights. In general, the Company agrees to indemnify the customer if a third party asserts
patent or other infringement on the part of the customer for its use of the Companys products. The Company has entered into indemnification agreements with the officers and directors of its subsidiaries. From time to time, the Company also
enters into agreements in connection with its acquisition and divesture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is not readily determinable due to the conditional nature
of the Companys potential obligations and the specific facts and circumstances involved with each particular agreement, and as such the Company has not recorded a liability in connection with these indemnifications. Historically, payments made
by the Company under these types of agreements have not had a material effect on the Companys consolidated financial condition, results of operations or cash flows.

In the normal course of business, the Company is subject to proceedings, lawsuits, claims and other matters, including those that relate to the environment, health and safety, employee benefits, export compliance, intellectual property, tax
matters, and other regulatory compliance and general matters, including those described below. Because such matters are subject to many uncertainties, their outcomes are not predictable. While the Company believes that amounts provided in our
condensed consolidated financial statements are currently adequate in light of the probable and estimable liabilities, there can be no assurances that the amounts required to satisfy alleged liabilities from such matters will not impact future
operating results.

The Company is subject to governmental investigations and requests for information from time to time. Presently, the United States
Department of Justice is conducting an investigation regarding the propriety of the Companys arrangements or understandings with others in connection with certain federal contracts and the adequacy of certain disclosures related to such
contracts. The investigation arises in connection with civil litigation in federal district court filed under the qui tam provisions of the civil False Claims Act against a number of information technology companies, including the Company. The
complaints against the Company remain under seal. The Company has been conducting its own internal investigation focusing on the propriety of certain transactions under federal programs under which Teradata was a contractor. The Company has shared
evidence of questionable conduct that the Company has uncovered with the Justice Department and intends to continue to cooperate with the Justice Department in its investigation. The Company has accrued approximately $2 million related to the
current best estimate of the potential liability relating to this matter.

A separate portion of the governments investigation relates to the
adequacy of pricing disclosures made to the government in connection with negotiation of NCRs General Services Administration Federal Supply Schedule as it relates to Teradata, and to whether certain subsequent price reductions were properly
passed on to the government. Both NCR and the Company are participating in this aspect of the investigation, with respect to certain products and services of each, and each will assume financial responsibility for its own exposures, if any, without
indemnification from the other. At this time, the Company is unable to determine whether a liability is probable with respect to this aspect of the investigation.

The Company believes the amounts provided in its financial statements are adequate in light of the probable and estimable
liabilities. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from the matter described above and other matters, and to comply with applicable laws and regulations, will not exceed the amounts
reflected in the Companys financial statements or will not have a material adverse effect on its results of operations, financial condition or cash flows. Any liabilities that may be incurred in excess of those amounts provided as of
September 30, 2008, cannot be reasonably determined at this time.

Guarantees and Product Warranties. Guarantees associated with the
Companys business activities are reviewed for appropriateness and impact to the Companys financial statements. Periodically, the Companys customers enter into various leasing arrangements coordinated with a leasing partner. In some
instances, the Company guarantees the leasing partner a minimum value at the end of the lease term on the leased equipment or guarantees lease payments between the customer and the leasing partner. As of September 30, 2008, the maximum future
payment obligation of this guaranteed value and the associated liability balance was $3 million.

The Company provides its customers a standard
manufacturers warranty and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors such as labor rates, average
repair time, travel time, number of service calls and cost of replacement parts. For each consummated sale, the Company recognizes the total customer revenue and records the associated warranty liability using pre-established warranty percentages
for that product class.

The following table identifies the activity relating to the warranty reserve for the nine months ended September 30:

In millions

2008

2007

Warranty reserve liability

Beginning balance at January 1

$

6

$

8

Provisions for warranties issued

9

9

Settlements (in cash or in kind)

(10

)

(12

)

Balance at end of period

$

5

$

5

The Company also offers extended and/or enhanced coverage to its customers in the form of maintenance contracts.
The Company accounts for these contracts by deferring the related maintenance revenue over the extended and/or enhanced coverage period. Costs associated with these maintenance contracts are not included in the table above.

In addition, the Company provides its customers with certain indemnification rights. In general, the Company agrees to indemnify the customer if a third party asserts
patent or other infringement on the part of the customer for its use of the Companys products. The Company has entered into indemnification agreements with the officers and directors or its subsidiaries. From time to time, the Company also
enters into agreements in connection with its acquisition and divesture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is not readily determinable due to the conditional nature
of the Companys potential obligations and the specific facts and circumstances involved with each particular agreement, and as such the Company has not recorded a liability in connection with these indemnifications. Historically, payments made
by the Company under these types of agreements have not had a material effect on the Companys consolidated financial condition, results of operations or cash flows.

In the normal course of business, the Company is subject to proceedings, lawsuits,
claims and other matters, including those that relate to the environment, health and safety, employee benefits, export compliance, intellectual property, tax matters, and other regulatory compliance and general matters, including those described
below. Because such matters are subject to many uncertainties, their outcomes are not predictable. While the Company believes that amounts provided in our condensed consolidated financial statements are currently adequate in light of the probable
and estimable liabilities, there can be no assurances that the amounts required to satisfy alleged liabilities from such matters will not impact future operating results.

The Company is subject to governmental investigations and requests for information from time to time. Presently, the United States Department of Justice is conducting an investigation regarding the propriety of the
Companys arrangements or understandings with others in connection with certain federal contracts and the adequacy of certain disclosures related to such contracts. The investigation arises in connection with civil litigation in federal
district court filed under the qui tam provisions of the civil False Claims Act against a number of information technology companies, including the Company. The complaints against the Company remain under seal. The Company has been conducting its
own internal investigation focusing on the propriety of certain transactions under federal programs under which Teradata was a contractor. The Company has shared evidence of questionable conduct that the Company has uncovered with the Justice
Department and intends to continue to cooperate with the Justice Department in its investigation. The Company has recorded a reserve of approximately $2 million related to the current best estimate of the potential liability relating to this matter.

A separate portion of the governments investigation relates to the adequacy of pricing disclosures made to the government in connection with
negotiation of NCRs General Services Administration Federal Supply Schedule as it relates to Teradata, and to whether certain subsequent price reductions were properly passed on to the government. Both NCR and the Company are participating in
this aspect of the investigation, with respect to certain products and services of each, and each will assume financial responsibility for its own exposures, if any, without indemnification from the other. At this time, the Company is unable to
determine whether a liability is probable with respect to this aspect of the investigation.

The Company believes the amounts provided in its financial statements are adequate in light of the probable and estimable
liabilities. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from the matter described above and other matters, and to comply with applicable laws and regulations, will not exceed the amounts
reflected in the Companys financial statements or will not have a material adverse effect on its results of operations, financial condition or cash flows. Any liabilities that may be incurred in excess of those amounts provided as of
June 30, 2008, cannot be reasonably determined at this time.

Guarantees and Product Warranties. Guarantees associated with the Companys
business activities are reviewed for appropriateness and impact to the Companys financial statements. Periodically, the Companys customers enter into various leasing arrangements coordinated with a leasing partner. In some instances, the
Company guarantees the leasing partner a minimum value at the end of the lease term on the leased equipment or guarantees lease payments between the customer and the leasing partner. As of June 30, 2008, the maximum future payment obligation of
this guaranteed value and the associated liability balance was $4 million.

The Company provides its customers a standard manufacturers warranty and
records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors such as labor rates, average repair time, travel time, number
of service calls and cost of replacement parts. For each consummated sale, the Company recognizes the total customer revenue and records the associated warranty liability using pre-established warranty percentages for that product class.

The following table identifies the activity relating to the warranty reserve for the six months ended June 30:

In millions

2008

2007

Warranty reserve liability

Beginning balance at January 1

$

6

$

8

Accruals for warranties issued

6

6

Settlements (in cash or in kind)

(6

)

(8

)

Balance at end of period

$

6

$

6

The Company also offers extended and/or enhanced coverage to its customers in the form of maintenance contracts.
The Company accounts for these contracts by deferring the related maintenance revenue over the extended and/or enhanced coverage period. Amounts associated with these maintenance contracts are not included in the table above.

In addition, the Company provides its customers with certain indemnification rights. In general, the Company agrees to indemnify the customer if a third party asserts
patent or other infringement on the part of the customer for its use of the Companys products. In addition, the Company has entered into indemnification agreements with the officers and directors or its subsidiaries. From time to time, the
Company also enters into agreements in connection with its acquisition and divesture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is not readily determinable due to the
conditional nature of the Companys potential obligations and the specific facts and circumstances involved with each particular agreement, and as such the Company has not recorded a liability in connection with these indemnifications.
Historically, payments made by the Company under these types of agreements have not had a material effect on the Companys consolidated financial condition, results of operations or cash flows.

In the normal course of business, the Company is subject to proceedings, lawsuits, claims and other matters, including those that relate to the environment, health and safety, employee benefits, export compliance,
intellectual property, tax matters, and other regulatory compliance and general matters, including those described below. Because such matters are subject to many uncertainties, their outcomes are not predictable. While the Company believes that
amounts provided in our condensed consolidated financial statements are currently adequate in light of the probable and estimable liabilities, there can be no assurances that the amounts required to satisfy alleged liabilities from such matters will
not impact future operating results.

The Company is subject to governmental investigations and requests for information from time to time. Presently, the
United States Department of Justice is conducting an investigation regarding the propriety of the Companys arrangements or understandings with others in connection with certain federal contracts and the adequacy of certain disclosures related
to such contracts. The investigation arises in connection with civil litigation in federal district court filed under the qui tam provisions of the civil False Claims Act against a number of information technology companies, including the Company.
The complaints against the Company remain under seal. The Company is conducting its own internal investigation focusing on the propriety of certain transactions under federal programs under which Teradata was a contractor. The Company has shared
evidence of questionable conduct that the Company has uncovered with the Justice Department and intends to continue to cooperate with the Justice Department in its investigation. The Company has recorded a reserve of approximately $1 million related
to the current best estimate of potential liability relating to this matter.

A separate portion of the governments investigation relates to the
adequacy of pricing disclosures made to the government in connection with negotiation of NCRs General Services Administration Federal Supply Schedule as it relates to Teradata, and to whether certain subsequent price reductions were properly
passed on to the government. Both NCR and the Company are participating in this aspect of the investigation, with respect to certain products and services of each, and each will assume financial responsibility for its own exposures, if any, without
indemnification from the other. At this time, the Company is unable to determine whether it has liability with respect to this aspect of the investigation.

The Company believes the amounts provided in its financial statements are adequate in light of the probable and estimable liabilities. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from
the matter described above and other matters, and to comply with applicable laws and regulations, will not exceed the amounts reflected in the Companys financial statements or will not have a material adverse effect on its results of
operations, financial condition or cash flows. Any costs that may be incurred in excess of those amounts provided as of March 31, 2008, cannot currently be reasonably determined.

Guarantees and Product Warranties. Guarantees associated with the Companys business activities are reviewed for appropriateness and impact to the Companys financial statements. Periodically, the
Companys customers enter into various leasing arrangements coordinated with a leasing partner. In some instances, the Company guarantees the leasing partner a minimum value at the end of the lease term on the leased equipment or guarantees
lease payments between the customer and the leasing partner. As of March 31, 2008, the maximum future payment obligation of this guaranteed value and the associated liability balance was $4 million.

The Company provides its customers a standard manufacturers warranty and records, at the time of the sale, a corresponding estimated liability for potential
warranty costs. Estimated future obligations due to warranty claims are based upon historical factors such as labor rates, average repair time, travel time, number of service calls and cost of replacement parts. For each consummated sale, the
Company recognizes the total customer revenue and records the associated warranty liability using pre-established warranty percentages for that product class.

The following table identifies the activity relating to the warranty reserve for the three months ended March 31:

In millions

2008

2007

Warranty reserve liability

Beginning balance at January 1

$

6

$

8

Accruals for warranties issued

3

3

Settlements (in cash or kind)

(4

)

(3

)

Balance at end of period

$

5

$

8

The Company also offers extended and/or enhanced coverage to its customers in the form of maintenance contracts.
The Company accounts for these contracts by deferring the related maintenance revenue over the extended and/or enhanced coverage period. Amounts associated with these maintenance contracts are not included in the table above.

In addition, the Company provides its customers with certain indemnification rights. In general, the Company agrees to indemnify the customer if a third party asserts
patent or other infringement on the part of the customer for its use of the Companys products. In addition, the Company has entered into indemnification agreements with its officers and directors. From time to time, the Company also enters
into agreements in connection with its acquisition and divesture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is not readily determinable due to the conditional nature of the
Companys potential obligations and the specific facts and circumstances involved with each particular agreement, and as such the Company has not recorded a liability in connection with these indemnifications. Historically, payments made by the
Company under these types of agreements have not had a material effect on the Companys consolidated financial condition, results of operations or cash flows.

In the normal course of business, the Company is subject to proceedings, lawsuits, claims and other matters, including those that relate to the environment, health and
safety, employee benefits, export compliance, intellectual property, tax matters, and other regulatory compliance and general matters, including those described below. Because such matters are subject to many uncertainties, their outcomes are not
predictable. While the Company believes that amounts provided in our condensed consolidated financial statements are currently adequate in light of the probable and estimable liabilities, there can be no assurances that the amounts required to
satisfy alleged liabilities from such matters will not impact future operating results.

The Company is subject to governmental investigations and requests
for information from time to time. Presently, the United States Department of Justice is conducting an investigation regarding the propriety of the Companys arrangements or understandings with others in connection with certain federal
contracts and the adequacy of certain disclosures related to such contracts. The investigation arises in connection with civil litigation in federal district court filed under the qui tam provisions of the civil False Claims Act against a number of
information technology companies, including the Company. The complaints against the Company remain under seal. The Company is conducting its own internal investigation focusing on the propriety of certain transactions under four federal programs
under which Teradata was a contractor as well as the adequacy of pricing disclosures to the government under certain of the Companys federal contracts. The Company has shared evidence of questionable conduct that the Company has uncovered with
the Justice Department and intends to continue to cooperate with the Justice Department in its investigation. The Company has recorded a reserve of approximately $1 million related to the current best estimate of potential liability relating to this
matter.

The Company has an uncertain tax position related to the amortization (and deductibility) of certain capitalized research and development
expenses. The matter is discussed in further detail in Note 8.

The Company believes the amounts provided in its financial statements, as prescribed by
GAAP, are adequate in light of the probable and estimable liabilities. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from the matter described above and other matters, and to comply with
applicable laws and regulations, will not exceed the amounts reflected in the Companys financial statements or will not have a material adverse effect on its results of operations, financial condition or cash flows. Any costs that may be
incurred in excess of those amounts provided as of September 30, 2007 cannot currently be reasonably determined.

Guarantees and Product Warranties Guarantees associated with the Companys business activities are reviewed
for appropriateness and impact to the Companys financial statements. Periodically, the Companys customers enter into various leasing arrangements coordinated with a leasing partner. In some instances, the Company guarantees the leasing
partner a minimum value at the end of the lease term on the leased equipment or guarantees lease payments between the customer and the leasing partner. As of September 30, 2007, the maximum future payment obligation of this guaranteed value and
the associated liability balance was $6 million.

The Company provides its customers a standard manufacturers warranty and records, at the time of
the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors such as labor rates, average repair time, travel time, number of service calls per
machine and cost of replacement parts. For each consummated sale the Company recognizes the total customer revenue and records the associated warranty liability using pre-established warranty percentages for that product class. From time to time,
product design or quality corrections are accomplished through modification programs. When identified, associated costs of labor and parts for such programs are estimated and accrued as part of the warranty reserve.

The following table identifies the activity relating to the warranty reserve for the nine months ended September 30:

In millions

2007

2006

Warranty reserve liability

Balance at January 1

$

8

$

7

Accruals for warranties issued

9

8

Settlements (in cash or in kind)

(12

)

(8

)

Balance at September 30

$

5

$

7

The Company also offers extended warranties to its customers as maintenance contracts. The Company accounts for
these contracts by deferring the related maintenance revenue over the extended warranty period. Amounts associated with these maintenance contracts are not included in the table above.

In addition, the Company provides its customers with certain indemnification rights. In general, the Company agrees to indemnify the customer if a third party asserts patent or other infringement on the part of the
customer for its use of the Companys products. From time to time, the Company also enters into agreements in connection with its acquisition and divesture activities that include indemnification obligations by the Company. The fair value of
these indemnification obligations is not readily determinable due to the conditional nature of the Companys potential obligations and the specific facts and circumstances involved with each particular agreement. The Company has not recorded a
liability in connection with these indemnifications. Historically, payments made by the Company under these types of agreements have not had a material effect on the Companys condensed consolidated financial condition, results of operations or
cash flows.